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ENVIRONMENTSOF
*:10520
ORGANIZATIONS
HowardE. Aldrich
CornellUniversity,
andLaborRelations,
NewYorkStateSchoolofIndustrial
Ithaca,NewYork14850
Jeffrey
Pfeffer
94720
ofCalifornia,
California
Berkeley,
Administration
University
SchoolofBusiness
INTRODUCTION
has drawn increasing
The relationshipbetweenorganizationsand environments
in therecentliterature
ofthesociologyoforganizations.We considerthe
attention
relationsto be a specialcase ofthemoregeneralstudy
subjectofinterorganizational
relaDimensionsof interorganizational
of organizationsand theirenvironments.
tionshavebeenlisted(Marrett1971),and partiallydevelopedparadigmsforanalyzrelationshave been proposed.The naturalselection
ingorganization-environment
posits
perspective,
argumentforan environmental
model,developingthestrongest
thatbestfitthe
characteristics
factorsselectthoseorganizational
thatenvironmental
model,
environment
(Hannan & Freeman1974,Aldrich1971b).A complementary
variouslycalled a politicaleconomymodel (Benson 1975,Wamsley& Zald 1973),
a dependenceexchangeapproach(Jacobs 1974, Hasenfeld1972), and a resource
1972b),arguesforgreaterattentionto internalorganizadependencemodel(Pfeffer
thatorganizationalpoliticaldecision-making
processesand also fortheperspective
tionsseek to manageor strategically
adapt to theirenvironments.
for
The two models agree on the importanceof organizationalenvironments
in theirevaluation
butdiffer
decisionsand structures,
understanding
organizational
selection.Currentliteraturehas
of the importanceof the role of environmental
elementsof both incompletely
developedperspectivesand the shape of organizationalsociologywill be determinedby the implicitdebate takingplace. As it is
we have chosento
impossibleto ascertaintheultimateresolutionofthisargument,
fromindustrial
in thischapter,and to includeliterature
examinebothperspectives
science and organizationalbehavior,as well as
organization,and administrative
fromorganizationalsociology.
79
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80
HistoricalPrecedents
since
is nota recentdevelopment,
environments
on organizational
The emphasis
theeffect
of social
studiesexamined
and comparative
Weber's(1968) historical
onbureaucracy.
studies
oftheTVA (1949)andtheCommunist
Selznick's
structure
conexternal
as an important
includedtheenvironment
Party(1960) explicitly
entrepreneurial
between
andtheworkofBendix(1956)on therelationship
straint,
Thetheory
andsocialstructure
is also in thistradition.
ideologies
andmanagerial
to its
of a singleorganization
treatsthe relationship
of thefirmin economics
priceandoutput
concerning
decisions
environment
andpositsthatorganizational
econoorganization
ofmarket
forces
1966).Industrial
(e.g.Stigler
aretheoutcome
power
toacquiremarket
oforganizations
withtheability
mistshavebeenconcerned
(Phillips1960,Scherer1970).Anthropologists
and modifytheirenvironments
withtheconceptofsocietalevolution
intotheirtheories
theenvironment
brought
in societalevolution
(White1949,Sahlins& Service1960),and a similarinterest
in the1960sin sociology
(Parsons1966).
occurred
to whichthisworkhasbeen
abouttheextent
One couldposeseveralquestions
withtheintriguing
questionof whytherehas beenlittle
cumulative,
beginning
in economics
and
organization
between
thefieldsof industrial
cross-fertilization
ontheeffects
toconsider
whyresearch
Itisalsointeresting
sociology.
organizational
sometimes
waxesand wanes,withattention
of environments
on socialstructure
Thesequestions
processes.
focused
onexternal
effects,
andatothertimesoninternal
(cfHirsch1975a).Thereiscurrently
arebestleftforsociologists
ofsciencetoanswer
withpaperscontaininenvironmental
effects
andthejournals
arefilled
greatinterest
in theirtitles.
or interorganizational
ing the words environment
Evoluforms.
inbiology,
fromlesstomorecomplex
forexample,
ofa progression;
is
of progress,
as each succeeding
generation
tionalso carriessomeconnotation
moreadvancedintheevolutionary
process.Byusingthetermnatural
presumably
thattheprocessof organizational
or ecological,
we emphasize
change,
selection
tomore
involve
doesnotnecessarily
progress
whilecontrolled
bytheenvironment,
The
or to betterorganizations.
complexor higherformsof socialorganization
towarda
are moving
meansthesocialorganizations
processof naturalselection
more.
fitwiththeenvironment,
butnothing
better
levelof
form
appliesat thepopulation
Thenatural
modelinitsoriginal
selection
rather
thanat thelevelofsingleunits.Environments
differentially
organizations
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ENVIRONMENTSOF ORGANIZATIONS
81
selectorganizations
forsurvivalon thebasisofthefitbetweenorganization
structure
(and activities)and environmental
characteristics
(Hannan & Freeman1974,Buckley 1967). Those organizations
thathave theappropriatesocial structure,
forwhateverreason,are selectedover thosethatdo not.
As developedby Campbell(1969), the naturalselectionmodelhas threestages.
The modelis not intendedto accountforshort-run
changes,whichare temporary
responsesto local conditions,but ratherforlong-runtransformations
in the form
of theelementsbeingexamined.In biologytheformsthatare changingare typical
speciesgenotypes,
whereasin social sciencewe are interested
in changesin theform
of social organization.In organizationalsociology,formsare currently
identified
throughvarious typologies,such as mechanistic-organic
or bureaucratic-professional,or throughan empirically
developedtypology(cf Hall 1972,chap. 2). Such
typologiesare oftennotcomplexor developedsufficiently
to permita verycomprehensiveecologicalanalysis.
The firststagein thenaturalselectionprocessis theoccurrenceof variationsfor
whateverreason, planned or uplanned. In organic evolution,variationsoccur
throughthegeneticmutationprocess,whilein thelearningprocessvariationoccurs
in theexploratory
responsesmade to stimuli.Variationsare theraw materialfrom
whichtheselectionprocesscullsthosestructures
orbehaviorsthatare mostsuitable.
The secondstageis theoperationofconsistent
selectioncriteriathatdifferentially
select some variationsover othersor selectivelyeliminatecertainvariations.In
organicevolutionthe differential
survivalof certainmutantformsthatare better
able to exploitthe food supplyin theirenvironment
reflectsthe operationof a
resource-based
selectioncriterion.Differential
reinforcement
of particularexploratoryresponsesby animals,in a consistentmanner,is the selectionstage in the
learningprocess.
The thirdstage in the ecologicalprocessinvolvesthe operationof a retention
mechanismfortheselectiveretention
ofthepositively
selectedvariations.Retention
occurswhencertainvariationsare preserved,
duplicated,or reproduced.In organic
evolutionthe retention
mechanismis the chromosome-gene
system.Positivelyselectedvariationssurviveand reproducesimilarothers.For thelearningprocessthe
memorysystemis themeanswherebypositivelyselectedresponsescan be recalled
forfutureuse.
The processas describedis perfectly
generaland can be appliedto any situation
wherethethreestagesare present.The three-stage
modelcompletelydescribesthe
evolutionary
process.As Campbell(1969:73) noted,"Given thesethreeconditions,
an evolutionin thedirectionofbetterfitto theselectivesystembecomesinevitable."
Beforeconsideringsomeofthetheoreticalproblemsof-theecologicalmodel,we
should note threeproblemsthat have limitedthe applicationof this model in
organizationalsociology.First,it is most appropriatelyapplied at the fieldor
populationlevel,as it is not the fitnessof any singleorganization,but ratherthe
distribution
of fitnessacross a populationof organizationsthatis of interest.This
requiresthe studyof relativelyheterogeneous
populationsof organizationsover a
fairlylong timespan,somethingfewinvestigators
have the fundingor the timeto
do, althoughStinchcombe(1965) attempteda partialversionofsuchan analysisin
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82
Summary
As a modeloforganizational
change,thenaturalselectionperspective
is indifferent
regardingthe source of variationor change in the firstplace. Selectionof social
structures
is accomplishedby differential
survivalof structuralforms,ratherthan
by the adaptationof a singleorganizationalunit.While in thismodelselectionis
determined
to theenvironment,
by fitness
no further
is providedas to
specification
theselectioncriteria.Retention,theoppositeof variation(Weick 1969),is accomplishedthroughorganizationalstability,
in theuse of unchangingstanmanifested
dard operatingproceduresor formalrules.
Since selectionis made by the environment
accordingto some dimensionof
a theoristusingthismodelcould,in explainingonlylong-runchanges,safely
fitness,
neglectintraorganizational
managerialprocesses.In the long runonlythoseorganizationsthatfitthe environment
will surviveand, consequently,
one need not be
as concernedwiththeprocessesbywhichsuchan organization-environment
match
is achieved.Statedin thisform,theecologicalperspective
can be seento be virtually
isomorphicwiththe economictheoryof perfectcompetition(Winter1971) and
similarto elementsofwhathas beencalled structural
contingency
theory(Pennings
1975). Microeconomictheory,or the theoryof the firm,also neglectsinternal
realities.Friedman(1953) arguedthat since firmsare forcedto
decision-making
behaveas iftheyare maximizingprofitbecauseof competition,
theassumptionsof
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ENVIRONMENTSOF ORGANIZATIONS
83
in equilibrium,
profit
maximization
willlead to correctpredictions
regardlessofthe
processby which such equilibriumstatesare reached.In both naturalselection
theoryand microeconomics,
theenvironment
selectsthe mostfit,or optimalorganizations,and bothimplicitly
assumethattheindividualsocial unitis itselfpowerless to affectthe selectionprocess.Both modelsfocusstronglyon the processof
selection,concerning
themselves
lesswithvariation.Indeed,one mightcharacterize
thetheoryof the firmas a theoryof the selectioncriteriathatare inevitablegiven
natureof theenvicertainassumptionsaboutdecisionmakingand thecompetitive
ronment.
Bothstructural
contingency
theoryand ecologicalmodelspositan optimal
fitbetweentheorganizationand itsenvironment
and structural
contingency
theory
differs
chieflyin its emphasison managerialadaptationto findthefit,ratherthan
on changebeingaccomplishedthroughdifferential
survival.
MODEL
aremadein
Thenaturalselection
modelleavesoutquestions
abouthowdecisions
setofsolutions
Ifall decisions
areconfined
to somelimited
organizations.
(in the
thenitwouldbe proper
a singleoptimalsolution),
caseofmicroeconomic
theory,
to treatthemas irrelevant,
if one assumes furtherthat equilibriumis achieved
in its own right.
relatively
rapidlyand theprocessof adjustmentis not interesting
in theUnitedStatesthatfitthemodelof perfect
However,thereare fewindustries
competition
(Galbraith
1967),andfurthermore,
publicandsocialservice
organiza-
Theresource
from
theindisputable
that
dependence
modelproceeds
proposition
important,
orevenmoreimportant,
thanthelatter
(Pfeffer
1976).Thepresumed
end
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84
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ENVIRONMENTSOF ORGANIZATIONS
85
an attemptto subsumetheresourcedependenceapproachunderthenaturalselecbetweenthem.We
difference
tionmodelwouldonlytendto hide thefundamental
betweenemphasizingpersonalactionversusenvironmightnotethatthisdifference
the social sciences-in history,in the contrast
is foundthroughout
mentaleffects
betweenthe greatman approach versusthe approach that stressesthe effectof
stressing
betweenoperantconditioning,
in thedifference
and in psychology,
context,
and cognitive
and theoriesofpersonality
thecontrolofbehaviorbytheenvironment,
choice thatemphasizemorethe effectof intended,consciousaction.
In thefollowingsectionswe reviewrecentresearchon organizationsin termsof
itsrelationship
to thethreestagesofthenaturalselectionprocess,variation,selecamong the perspectives.The greatest
tion,and retention,notingdisagreements
amountof theoreticaldivergenceis with respectto the selectionstage,withthe
to managerialand organizaresourcedependencemodelassigningmoreimportance
tionaldecisionmakingthanthe ecologicalperspective.
VARIATION
to thesourceofvariation,as bothrandom
The naturalselectionmodelis indifferent
and plannedvariationserveequallywell in providingtheraw materialfromwhich
and
selectionis made. The generalprincipleis thatthe greaterthe heterogeneity
fora close fitto theenvironmental
therichertheopportunities
numberofvariations,
selectioncriteria.
made by Buckley(1967) and Hannan & Freeman(1974),
Followingsuggestions
we believethatthe naturalselectionmodel can be applied notjust to the survival
ofstructure
and
butalso to thepartialmodification
or failureofentireorganizations
of thetotalorganization.This modification
activitiesthatfallsshortof elimination
of the biologicalmodel takesintoaccountthe capacityof social organizationsto
fromhomeostaticchanges
alterstructure,
a processthatis qualitativelydifferent
change.Whereasormade by biologicalorganismsin responseto environmental
survivalof theentireunit,the
ganicevolutionproceedsby a processof differential
or
can also occurthroughadaptationsofstructure
changingofsocial organizations
conductin one part of the organizationwhile the restof the structureremains
unchanged.
Modifyingthe naturalselectionmodel in thisfashioncomplicatesan ecological
is changed
forsuccessfuladaptationto theenvironment
analysis,sincethecriterion
survivalor failureto the moreproblematiccriterionof
fromthe easier-to-observe
structuralchangeor stability.Ratherthan beingable to observea populationof
adaptingby theselectiveeliminationof the less fit,we mayfindthat
organizations
internaltransformations
almostall survive,butthateach has undergonesignificant
theecologicalmodelis a necessarysteptoward
ofstructure.
modifying
Nevertheless,
betweenorganicand social evolution(Zachariah 1971)
recognizingthe difference
and towardmakingnaturalselectiontheoryusefulfororganizationalanalysis.
Ecological changemay arise fromvariationbothbetweenand withinorganizaorganization
tions.Thereare likelytobe significant
variationswithina differentiated
in individualabilitiesto fillparticularroles,just as therewillbe variationsovertime
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86
in carryingout important
activities(Campbell 1969). Hirschman's(1970) assertion
thatall organizationsdriftintodeterioration
throughrandomerrorsin the performance of everydaydutiesis consistentwiththe ecologicalapproach.
Whilethenaturalselectionmodeldoes notspecifythesourceofvariation,economists,management
scientists,
and manysociologistshavearguedfortheimportance
of variation as a planned response to environmentalcontingencies.Penrose
(1952:819),forinstance,wrote,"Our knowledgeofwhymendo whattheydo is very
but thereis considerableevidencethatconsciouslyformulated
imperfect,
human
values do affectmen's actions,thatmanydecisionsare reachedaftera conscious
consideration
ofalternatives,
and thatmenhave a wide rangeof genuinechoices."
Similarly,sociologicaltheoriesof organizationtreatleadershipand organizational
designas rational,conscious,plannedactions(Gouldner 1954,Selznick 1957).
Variationbetweenorganizationsis inherentin the interorganizational
division
of labor across industriesand since the distribution
of organizationsby industry
changesovertime,we mightinferthatselectionat thislevelis occurring.Thereare
also variationswithinindustriesor generictypes,e.g. withinthe manufacturing
sectorand withinfirmsmanufacturing
particularproducts.Emery& Trist's(1965)
exampleofthefirmmanufacturing
cannedfoodsand thefirms
frozen
manufacturing
foodsis a case of such within-industry
variation.
Innovatingorganizations
may introducevariationintoa populationby deliberatelyvaryingfromcustomary
modesofbehavior.Innovation,however,neednotbe
a consciousstrategyand may be a resultof imperfect
attemptsto imitateother
organizationsperceivedto be successfulas pointedout by Alchian(1950:218-19):
"Whiletherecertainlyare thosewho consciouslyinnovate,thereare thosewho,in
theirimperfect
attemptsto imitateothers,unconsciouslyinnovateby unwittingly
acquiringsomeunexpectedor unsoughtuniqueattributes
whichundertheprevailing circumstances
provepartlyresponsibleforthesuccess." A continuingcycleof
imitation-innovation
in turn,attemptto imitate
mayoccur ifotherorganizations,
the unwitting
innovator.
Variationsmay be introducedinto the organizationalpopulationthroughthe
creationof new organizations.
Economicorganizationsare presumably
createdby
entrepreneurs
withthe risksof undertaking
a new
seekingprofitand confronted
venture.Theoriesof the formation
of new economicorganizationshave been presentedby Schumpeter(1934) and Knight(1921), while Stinchcombe(1965) has
treatedtheproblemoforganizational
formation
moregenerally.Giventherisksand
uncertainties
is surprisingly
involved,therateofcreationofneworganizations
high.
Whilethereis no systematic
data on the formationof nonbusinessorganizations,
in theperiodbetween1944 and 1954 over 5.4 millionnew smallfirmswereestablishedin theUnitedStatesand another4.5 millionweretransferred
to a newowner
(Aldrich 1971b). The large numberof voluntaryassociations(Hausknecht1962)
and social movements
thatcomeand go quiteregularly(Zald & Ash 1966,Zurcher
& Curtis1973) providefurther
evidencethata greatdeal of variationin the form
of new organizationsis introducedinto the organizationalpopulationover time.
The resourcedependencemodelpositsthatorganizations
attemptto managetheir
environments
and thatvariationsareconscious,plannedresponsesto environmental
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ENVIRONMENTSOF ORGANIZATIONS
87
and uncertainty,
contingencies.
Organizationsattemptto absorbinterdependence
eithercompletely,
as throughmerger(Pfeffer
1972b),or partially,as throughcooptation(Pfeffer
1972a,Allen 1974) or the movementof personnelamongorganizations(Pfeffer
& Leblebici1973b).Attempts
aremadeto stabilizerelationswithother
organizations,
usingtacticsrangingfromtacitcollusion(Scherer1970:157)to legal
contracts(Macaulay 1963). Researchon strategieshas been designedto testthe
hypothesis
thatobservedvariationsare plannedresponsesto environmental
conditions or at least that organizationsbehave as if theywere guided by normsof
rationality.
Pfeffer
(1972a) foundthatregulatedfirmsweremorelikelyto include
representatives
of outsidegroupson theirboardsthannonregulated
firmsand that
thepatternofmergeractivityfollowedthepatternof resourcetransactions
(Pfeffer
1972b).Alexander(1971) notedthataftertraditionalformsof mergerswerechallengedbytheantitrust
authorities,
firms
switchedto therarelychallengedconglomeratemerger.
Sincetheecologicalmodelis indifferent
to thesourceofvariations,
studiesshowingthatspecificvariationsappearto be responsesto environmental
conditionsare
notinconsistent
withthemodel.More troublesomeis thefactthatno attempthas
been made to testthe alternativehypothesis,
namelythat randomor unplanned
variationsplayan important
partin organizationalchange.A well-known
studyin
economicsis theattemptbyMansfield(1962) and othersto testGibrat'sLaw, which
statesthatgivenequal startingpoints,thesize distribution
ofa populationof firms
can be fairlywell approximated
by allowinggrowthovertimeto be determined
by
a randomsamplingfroma distribution
of growthrates.In reviewingsome experiments,Scherer(1970:126) notedthat"contraryto whatuntutoredintuitionmight
advise,the firmsdo not long remainequal in size and marketshare,even though
theirgrowthprospectsare identicalex ante. Patternsresembling
theconcentrated
structures
ofmuchAmericanmanufacturing
industry
emergewithina few(experimental)decades." However,Schererconcludesby callingforcautionin the use of
Gibrat'sLaw, as it patentlyexcludesmanyvariablesof interestto economists.
SELECTION
A criticaldistinction
betweentheresourcedependenceand naturalselectionmodels
of organizationalchangeis the relativeimportanceof environmental
selectionas
opposedto strategicdecisionmakingby organizationalmembers.For systematic
environmental
selectioncriteriato have an effect,
two conditionsmustbe present
(Campbell1969): (a) theremustbe numerousinstancesinvolved,i.e. a highrateof
variation,and (b) theremustbe a fairlyhighmortality
rateforthe organizations
or structures
involved.Withoutvariation,thereis no raw materialfortheselection
process,and withouta highmortality
rateenvironmental
selectioncriteriawould
be irrelevant.
The purestformofenvironmental
selectionis theselectivesurvivalor elimination
of completeorganizations,
dependingon theirfitwiththe environment.
For instance,iftheselectioncriteriawerebased on administrative
rationality,
nonbureaucraticorganizations
mightfailto survive,leavingonlybureaucracies.This typeof
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88
SelectionProcesses
The workof Hickson et al (1971) and otherswho have notedtheimportanceof
ch,. Ceand powerin organizations
theoreti(e.g. Child 1972) providesan important
cal linkbetweentheorganization-environment
literatureand theoriesof organizational behavior.In Hickson's strategiccontingencies'theory,power withinthe
organizationcomes froma subunit'scapabilityforcoping withcriticalorganizationaluncertainties,
as wellas fromtheimportance
oftheuncertainty
and theextent
to whichothersubunitscan substitute.Power withinthe organization,in other
words, is relatedto the uncertainties
and contingenciesthe organizationfaces
in turn,affects
(Crozier1964,Thompson1967). Powerwithintheorganization,
the
choicesmadewithinorganizations
aboutstructures
(Child 1972)and aboutresource
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ENVIRONMENTSOF ORGANIZATIONS
89
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90
StrategicChoice
Selectionin the ecologicalmodel is a matterof certainorganizationalvariations
beingeitherpositivelyor negatively
selected,dependingon theirmatchwithenvironmentalconditions.The modelis indifferent
as to how thevariationsarosein the
firstplace and theemphasisin selectionis on theroleoftheenvironment.
We have
alreadynotedthatin thecase oflargeor publicorganizations
thenotionofselection
being accomplishedthroughdifferential
survivalis probablyincorrect.Further
criticisms
ofthebasic conceptsoftheselectionprocessas developedin evolutionary
modelsare implicitin the workof theoristswritingin the strategicchoice (Child
1972) or politicaleconomy(Zald 1970) traditions.
Child (1972) raised threeargumentsto counterthe claim that environmental
influenceis an overwhelming
constrainton organizations.First,he noted that
organizationaldecisionmakershave moreautonomythanmightbe inferred
from
the perspectiveof environmental
determinism.
Decision makerscan both select
froma rangeofviablealternatives
compatiblewiththenichetheycurrently
occupy
and choose thetypeof environment
in whichthe organizationis to operate.Businessmen,forexample,may choose to enteror leave markets.Further,Cyert&
March (1963), Williamson(1964), and Hirschman(1970) have proposedthatthere
is typicallyslack in organizationaloperationsand thatfew,if any,organizations
operateat thelimitsofefficiency.
Whilecontingency
theorists
havearguedthatthere
is no universal,bestway to organize,theyhave searchedforthebeststructure
for
a givenenvironment
(Lawrence& Lorsch 1967). The pointmade hereis thatthere
maybe a varietyofstructures
thatare viablein a givenenvironment.
The inconsistentsupportfortheoriesofstructural
contingency
(Mohr 1971,Pennings1975),and
theliterature
whichindicatesthatthereare a varietyofstructural
mechanismsthat
mayaccomplishan organizational
purpose,suchas control(e.g. Meyer1972,Child
1973) are both consistentwiththisfirstchallengeto evolutionary
theory.
suchas productdifferentiation
Strategies
and marketsegmentation
can be viewed
as attempts
bybusinessfirms
to achievea widerrangeofdiscretion.
The traditional
marketing
strategywas to convinceconsumersthata productservedtheirneeds
betterthanproductsofcompetingfirms.Marketsegmentation
involvesan attempt
to meet the perceivedspecializedrequirements
of consumersin a disaggregated
market.Marketsegmentation
was the strategyused by adult educationprograms
in California(Clark 1956),in whichprogramsmeetingtheneedsofdifferent
groups
wereoffered.
associationsmustoftenchoosebetweenthesetwostrategies.
Voluntary
Iftheassociationstressesthegeneralneedsofall,itmaylose potentialmemberswith
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ENVIRONMENTSOF ORGANIZATIONS
91
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92
Conceptions
of theEnvironment
Followingup Child'sinsight,
Aldrich& Mindlin(1976) identified
twodifferent
of theenvironment
conceptions
in theorganizational
literature.
One approach,
exemplified
byDill (1958),Weick(1969),andDuncan(1972),treatsan organization'senvironment
as theflowofinformation
perceived
bymembers
attheorganization'sboundaries.
Theotherapproach,
exemplified
byPfeffer
(1972a,b) andAiken
& Hage (1968),treatsan organization's
environment
as theresources
available,
moreor lessignoring
theprocessbywhichinformation
abouttheenvironment
is
makers.
tendtostressthe
apprehended
bydecision
Analysts
from
bothapproaches
activeroleplayedbyan organization
rather
inselecting
structure,
thantheroleof
the environment
in selecting
appropriate
organizations
and organizational
responses.
Whentheenvironment
is considered
as a stockofresources,
thebasicconcept
is dependence,
usedbyinvestigators
defined
in termsofthebargaining
of
position
withrespect
& Aldrich
thefocalorganization
tointeracting
organizations
(Mindlin
1975,Jacobs1974).Although
thetermdependence
has notalwaysbeenused,
references
aremadetoresource
exchange
(Levine& White1961),powerandcontrol
ofinputand
oversourcesofsupport
(Selznick1949,Evan 1972),andimportance
fordetermining
structure
outputtransactions
organizational
(Katz& Kahn 1966).
onexternal
toleadtosuchinterorDependence
agents
forresources
ishypothesized
actionsas mergers,
and cooptation.
ganizational
jointventures,
Whentheenvironment
thebasicconcept
isconsidered
as a sourceofinformation,
usedbyinvestigators
assumedthat
hasbeenuncertainty.
Theorists
havegenerally
andinstability
complexity
oftheenvironment
generates
uncertainty
(Duncan1972),
thoughit might
be arguedthatuncertainty
is causedbytheorganization's
search
andanalysis
methods.
hasbeenhypothesized
toleadtolessformalized
Uncertainty
andlesscentralized
structures
be argued
(Burns& Stalker1961),thoughitmight
thatcomplex
andcontingent
moreoftheuncertainty
in
structures
simply
perceive
theenvironment.
are enactedor
BothWeick(1969)and Childhavearguedthatenvironments
createdthrough
a processof attention.
It does seemreasonable
to arguethat
actionswillbe determined
whichmayor may
organizational
byperceived
reality,
thattheresearcher
It is alsoreasonable
to
notbe thesameenvironment
perceives.
withdifferent
andinformation
structures
arguethatindifferent
organizations
systems,decisionmakerswillperceivetheenvironment
differently.
Organizational
monitoring
andscanning
systems
arehighlighted
bytheconceptofenvironmental
is severely
enactment
anddeserve
iftheorganization
further
Ofcourse,
exploration.
thenperception
constrained
as in a verycompetitive
bytheenvironment,
market,
is notimportant.
Thepersonnel
willoperateandperceive
intheorganization
effecor elseitwillsoongo outofexistence.
becomesimportant
tothe
tively
Perception
thattheorganization
extent
is insulated
fromorimmune
to environmental
effects.
To theextent
inpercepthattheorganization
is nottightly
constrained,
variations
tionsof organizational
in understanding
havemoreimportance
reality
organizationalstructures
and processes.
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ENVIRONMENTS OF ORGANIZATIONS
93
Limitsto StrategicChoice
oftheevolutionary
raisedagainstthegeneralapplicability
Whilethearguments
pointsof
thesealternative
arepersuasive,
modeltothestudyofsocialorganization
byorganizational
areselected
Whileenvironments
viewalsohavetheirlimitations.
process.
ofthisselection
on theoperation
thereare constraints
decisionmakers,
or
restrictions
bylawbecauseoffunding
maybe excluded
environments
Potential
a
haveidentified
economists
to entry.For businessorganizations,
legalbarriers
fromgaininga positionin a
entrants
potential
thatprevent
of barriers
number
threesuch
Caves(1972)discusses
organizations.
market
alreadyservedbyexisting
barriers.
costs
unitproduction
existwhenan organization's
barriers
Economy-of-scale
accountsfora
untiltheorganization
remainhigherthanthoseof competitors
mustabsorb
thefirm
shareofthemarket.
Untilitscostsarecompetitive,
substantial
itexhausts
before
isobtained
shareofthemarket
costsandhopethata larger
higher
sizeattheoutset
a firm
couldbuilda largeplantofefficient
itscapital.Alternatively,
an
Forexample,
sharetodisposeofitsoutput.
andhopetoachieveenoughmarket
toenterthecigarette
market
mustbuilda plantthatproduces
wishing
entrepreneur
ifeconomies
ofscaleare
market
soldinthenational
about15-20%ofthecigarettes
arepresent
in manyindustries
(Caves1972),
tobe realized.Whilescaleeconomies
to plantsize
applyprimarily
twopointsshouldbe noted.First,scaleeconomies
ofeconomies
ofscale
size.Second,Bain(1956)found
thatthefactor
rather
thanfirm
Scale
corporations.
couldnotaccountforthelargesizeofmanymajorindustrial
far
are typically
notgreatand are achievedat a scale of operations
economies
in manyindustries.
smallerthanthatwhichprevails
byprofitintomarkets
in economic
analysisto explainentry
Whileintroduced
of scaleappliesto otherorganizational
theconceptof economies
seekingfirms,
mayonlygranta placeon theballotor
legislation
forms
as well.Stateandfederal
or
topolitical
thatachievea givenlevelofself-financing
subsidies
parties
campaign
ofnewpolitical
TheUnitedFund
parties.
limits
thegrowth
votes,
andthiseffectively
ofa sufficiently
large
todemonstrate
theexistence
forfunds
newapplicants
requires
thosestudent
associations
onlysubsidize
services,
whileuniversities
fortheir
market
student
sufficient
interest.
thatareableto demonstrate
thanthose
existwhena newfirm's
costsarehigher
costbarriers
toentry
Absolute
toachieve
orwhenthecostofentry
ofthefirm's
output,
ofexisting
firms,
regardless
is so greatas to excludemost
ofscaleor to achievemarket
acceptance
economies
not availableto newentrants,
maypossessknowledge
entrants.
Existingfirms
indoingtheresearch
involved
expense
ortheprohibitive
becauseofpatents
perhaps
a plantbigenoughto compete.A classicexampleis theCoca Cola
or building
fortheproductthatis knownonlyto a few
Companywitha formula
Bottling
firms
mayhaveacquiredcontroloverthe
Existing
personsin theorganization.
thusdenying
Untiltheend
itsuseto a newfirm.
resource,
supplyofan important
its
of thesecondWorldWar theAluminum
Companyof Americamaintained
of the
its monopolization
through
positionas thesinglesupplierof aluminum
to starta newfirmmaybe so
bauxitesupply.The amountof capitalrequired
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94
enormousas to be prohibitive.
For example,in 1954itwas estimatedthatthecapital
requiredto buildan efficient
automobileplantwas $250-500 million.Thus it is not
surprisingthattherehas been limitedentryintothe automobilemarket.
Product differentiation
barriersto entryexist when establishedfirmshave
achievedhighvisibility
and theirbrandshave gainedwide recognition.
For a new
firmto enterthemarket,regardlessoftheproductioneconomicsinvolved,thefirm
mustspendan enormousamounton advertising
to developbrandrecognition
and
marketacceptance.The existingcompetitor
needspendonlyenoughto maintainan
imagethathas been developedovera long periodof time.This added expenditure
requiredforovercomingadvertising
economiesof scale providesthe new entrant
withcost disadvantagesthatmustbe absorbedor reflected
in highersellingprices.
Voluntaryassociationsface similarproblems,as particularobjectivesor causes
come to be identified
withparticularassociations(Aldrich 1971a). Consider,for
example,theproblema newgroupworkingin theecologyarea wouldhavewinning
membersawayfromtheSierraClub. Many publicsectororganizations
further
raise
thebarriersto entryby beingrecognizedlegallyor sociallyas monopoliesforthe
serviceor producttheyoffer.
The existenceofbarriersto entrymakesclearthelimitsto organizationalchoice
of environment.
Further,barriersto entryprovidea partialexplanationforwhy
ratesof changein some populationsare much slowerthan in others.Barriersto
entrylimittherangeof variationin a populationand are a negativeselectiveforce
operatingagainstneworganizations.
The higherthebarriersto entry,thelowerthe
pressureforchangein the structureor activitiesof existingorganizations.
The idea of choice of an environment
may be an overstatement
of the actual
degreeof planningand rationality
exercisedby organizationsin movinginto new
niches(Starbuck1975). Behavioraltheoriesofthefirmtypicallyassumethatorganizationsexaminetheirenvironments
only when theyare under some pressure
(Cyert& March 1963) or thatsearchfornew opportunities
occursonlywhenthe
organizationfaces problemswithits currentactivities.Studiesof organizational
managersfindthat the managersoftenoperateon the basis of folktheoriesor
conventionalwisdom (Mintzberg1973), takingtheirenvironment
as given and
workingwithinthe constraints.
Organizationsoccasionallymove intoa new environmentalnicheon thebasis of misperceptions
of theirfitnessforthe niche,such
as RCA's entryintothe computerbusiness.
The secondcriticismof environmental
determinism,
thatorganizationshave the
powerto modifytheirenvironments,
is truechieflyforthelargestorganizationsor
thosethatare politicallywell connected.However,onlyslightlymorethan3% of
all businessenterprises,
as enumeratedby the US Social SecurityAdministration,
haveover50 employees.It is unlikelythatfirms
ofunderthissize havemuchpower
to affecttheirenvironments,
althoughthis variesby local circumstances.
At the
same time,we should recognizethatthereis some evidencethatconcentration
of
resourcesin fewerlarge organizationsis increasing,and thatclearlytheselarger
organizationsand comparableorganizationsin the public sectordominatemany
aspectsof currentlife.
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ENVIRONMENTSOF ORGANIZATIONS
95
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96
from
and in divergence
ronmentand thefactorsthatcause variationsin perceptions
are critical,thepointis notlikelyto affect
otherindicators.Unlesssuchdifferences
analysesof organizationalchange.
RETENTION
The retentionstageof the naturalselectionprocesscan be thoughtof as stability
or decisionrulesof an individualorganization,as thepreservation
in thestructure
oforganizationalformsovertime,or as stabilityin thepatternofinterdependencies
Retentionin social evolutionis at this
betweenorganizationsin an environment.
to conceptualizethanin organicevolutionand we do not want
timemoredifficult
and
analoguesto chromosomes
to forcetheissuebysearchingfortheorganizational
mechanismsin
ofretention
genes.Instead,we considersomegeneralcharacteristics
social systems,identifypossiblesocial retentionmechanisms,and then consider
byStinchpresented
characteristics
oforganizational
anewthedata on theretention
combe (1965).
Retentionofsuccessfuladaptationsin social systemsdependsupontheretention
of knowledgefromone generationto the next(Campbell 1969).
and transmission
links
Callingthisknowledgecultureand the retentionprocessinstitutionalization
theoryto traditionalsociologicalconceptsbut does not constitutean
evolutionary
records,knowlsocietieswithfewwritten
explanation(Parsons1966).In preliterate
edge is passed throughthe generationsvia an oral traditionand thereare strong
passedalong(Campbell
or variationin theinformation
sanctionsagainstinnovation
modelexplainssanctionsagainstvaryingsuccessfultradi1969). The evolutionary
of societieswithfewsurplus
tionalpracticesin termsof the extremevulnerability
variationsmaymeannot
A seriesofunsuccessful
misfortune.
resourcesto short-run
of particularpracticesbut thefailureoftheentiresociety.
theselectiveelimination
Negativesanctionsneed nothave been consciouslydesignedwiththisobjectivein
modelpredictssimplythatsocietieswithoutsuch sancmind,as the evolutionary
tionswill not survive.As surplusresourcesaccumulate,variationand innovation
mayfinda nichein thesocietaldivisionoflabor
and innovators
are less threatening
(Lenski 1966).
Campbell(1969) arguesthatas societalformshave matured,therehas probably
and rationalizationof culture.Material
been a trendtowardthe externalization
and
and history,
nowcarriessocietaltraditions
cultureratherthantheoraltradition
thereis less dangerofadaptationsbeinglostbecauseof randomvariations.Written
the physicaland materialcomponentsof cities,and whatone
records,machinery,
ofpast
theexternalization
in a societyrepresent
mightcall thecapitalimprovements
This processis similarto thatdescribed
successfuladaptationsto theenvironment.
of knowledge.
by Berger& Luckmann(1967) forthe social construction
The continuingexistenceof certainformsdoes not mean that the formhas
retainedthe originalfunctionforwhichit was selected.Formscan and do change
and otherformschange.
as evolutiontakesplace and as theenvironment
functions
For example,some theorists(Bellah 1970) have argued that in the past century
ofproviding
havebeendisplacedin theirfunction
traditional
religiousorganizations
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ENVIRONMENTSOF ORGANIZATIONS
97
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98
in an organization'sleadershipmaybe anotherretention
mechanism
Continuity
that preservespatternsof behaviorand structure.Similarityin leadershipis enpeople
hancedby a stableselectionand promotionsystemthatrewardsand filters
in outlookand background.Because the filtering
is
accordingto theirsimilarity
typicallydone by those alreadyin leadershippositionsand because people are
attractedto otherswho are similarto themselves,the likelihoodof perpetuating
ofleadershiparegreat.Furthermore,
current
sincethepromotion
ofleaders
patterns
is based on theirexperienceand expertisein dealingwithcriticalorganizational
to the extentthatthe definition
recontingencies,
of organizationaluncertainties
mainsthesame,similarity
in leadershipcharacteristics
is further
assured.Organizationsthatare marketing-oriented,
suchas consumergoods companies,maytendto
promotepeople withsales or marketing
experiencewho, because of similarbackpolicy.
groundsand socialization,willhavefairlysimilarideas aboutorganizational
rather
Grocerystorechainsare runbypersonswithexperiencein storemanagement
thanthosewhowerepromotedfromstaff
thereare
positions.In manyorganizations
in backclearlydefinedpaths to the top positions,whichensuresome similarity
groundand information
on the partof thosewho achievethosepositions.
Externalpressuresforretaininga givenstructure
includeall theenvironmental
or behavdemandsthatoriginally
selected(or werecompatiblewith)thatstructure
associior.Competitive
memberpressureson voluntary
pressureson businessfirms,
ations,and politicalpressureson publicagenciesmayhelp to explaintheretention
of paststructures
by theseorganizations.Indeed,it is possiblefortheorganization
to seekto generateexternalpressuresintentionally
as a wayofhelpingitto maintain
presentform.
As impliedin our discussionof social forcesthatinduce commonperceptions
or subpopulation,
information
processingand transamongpersonsin an industry
of a limitedrangeof forms.Busimitting
organizationsmayassistin theretention
ness schools, trainingand educationalinstitutes,
consultingfirms,and trade or
formsthat
associationspromotespecificproceduresand organizational
professional
becomepartof the cultureof an organizationalpopulation.Some of theseprocedurescatchthepopularfancyand spreadto mostorganizations,
wheretheybecome
and encrustedwithorganizational
entrenched
e.g. divisionalas opposed
mythology,
to functional
formsofdepartmentalization.
Others,e.g. businessschools,are popularizedin one subpopulation,
but do not achievea long-lasting
place in the larger
population,e.g. the Planning,Programming,
BudgetingSystemsmovementof the
1960s.
Folk wisdomand industry
rulesofthumb(Scherer1970) arealso partoforganizationalculture,perpetuatedby all the forcesdiscussedin the sectionon selective
ofspecificformsbecausetheybecome
perception.
Theyplaya rolein theretention
part of the habitualbehaviorof membersof organizationsand are resistantto
change.Since selectiveeliminationor retention
dependson variationin the forms
of a population,a widespreadhabitcan effectively
insulatea populationagainsta
ifno competing
or subpopulaformsarisein otherindustries
changingenvironment,
tionsand new entrantsadopt the traditionalbehavioror structure.
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ENVIRONMENTS OF ORGANIZATIONS
99
Analysis
Examinationof Stinchcombe's
periodsin
formsappearin different
organizational
whydifferent
In considering
...
kindsoforganizations
that"certain
(1965:160)concluded
Stinchcombe
history,
to them."From
wasappropriate
before
thesocialstructure
couldnotbe invented
model,onewouldarguethattheenvironment
oftheevolutionary
theperspective
ata giventime.
forms
toparticular
advantage
togivea selective
musthavechanged
uponthenatureanddistribution
oftheformdepended
characteristics
Thespecific
wealthand
development,
technological
availablein theenvironment,
ofresources
Stinchcombe
1965:160-64).
(Stinchcombe
oflabormarkets
andthestructure
power,
i.e.havethesame
overtime,
persist
oncecreated,
forms,
whycertain
alsoconsidered
We shallusetheideasofthe
as whentheywerefounded.
characteristics
structural
between
as thereis compatibility
thisanalysis,
modelto reexamine
evolutionary
theory.
ofevolutionary
and theconcepts
position
Stinchcombe's
formsovertime,Stinchcombe
of organizational
As evidenceforthestability
offourgroupsofindusUS Censusdataontheworkforcecharacteristics
presents
Somegeneral
railroad
age,andmodern.
earlynineteenth-century,
tries:
pre-factory,
suchas agriindustries,
Pre-factory
thesegroups.
between
areapparent
differences
founded
laborthanindustries
andretailtrade,stillusemoreunpaidfamily
culture
andapparel,are
suchas woodworking
industries,
later.Earlynineteenth-century
below
inthattheyarebureaucratized
forms
from
earlier
butdiffer
firms,
stillfamily
such as railroadsand coal
level.Railroadage industries,
thetop management
at theverytop,buttheir
members
rather
thanfamily
havecareerofficials
mining,
Modernindusas modern
industries.
arenotas professionalized
staff
departments
with
bureaucratized,
areextensively
andairtransport,
vehicles
suchas motor
tries,
workers
at thetopandwithalmost
ofclericalandprofessional
a highproportion
laboror management.
no family
to explainwhythese
derivedan ad hoc set of threehypotheses
Stinchcombe
formmaystillbe themost
First,theoriginal
differences
havepersisted.
historical
may
ithashadto face.Second,institutionalization
efficient,
giventhecompetition
vestedinterests,
forces,
traditionalizing
through
whether
theform,
havepreserved
form
theoriginal
mayhavehad
Third,
position.
ideological
ora strongly
legitimated
or is assuredofa stablefunding
becauseit is a naturalmonopoly
no competitors
theyappearto be
are not testedempirically,
source.Whiletheseexplanations
consideration
thatwouldbe deducedfrom
toexplanations
andaresimilar
plausible
change.
modeloforganizational
ofthenaturalselection
we should
froman ecologicalperspective,
Beforelookingat theseexplanations
natureofthe
arbitrary
mentioned-the
ofa problem
previously
notethepresence
ofindustries
usedthedefinitions
Stinchcombe
forms.
definitions
oforganizational
railroads
andair
classified
as adoptedbytheBureauoftheCensus,andtherefore
iforganizations
emerge
A different
outcome
might
as different
industries.
transport
oflabor.
division
nicheintheinterorganizational
wereclassified
bytheirfunctional
have
andnewforms
organizations
Attheveryleast,onecouldarguethatinnovative
niches,perhapsmakinguse of different
appearedin nichesadjacentto existing
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100
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ENVIRONMENTS OF ORGANIZATIONS
101
selectioncriteriaare
most likelyto occur in new organizations,environmental
in affecting
irrelevant
the directionof changein a subpopulation.
Stinchcombe'sexplanationsforstabilityin formscan thus be reducedto the
selectionoperatesfreelyand
followingcases: (a) conditionswhereenvironmental
parameters
havenot
theoriginalformcontinuestobe chosenbecauseenvironmental
changedor new entrantshave not developeda moreadvantageousform;and (b)
eitherbecausethere
conditionswhereenvironmental
selectionis severelyrestricted
are barriersto entryor because organizationsare insulatedfromenvironmental
effects.
Stabilityof organizationalformscan be explainedby the naturalselection
organizationsbecauseof thearbimodel,thoughcare mustbe takenin classifying
trarydefinitions
of organizationalforms.Whetherformsare treatedas stable or
niche is defined.It is
evolvingdependspartlyon how widelyan environmental
possiblethatsome of Stinchcombe'sstableformsare actuallydeclining,if we use
a functionalclassification
of industries.
In usingtheecologicalmodelcare mustbe exercisednotto automatically
equate
stabilityof formwithstabilityof otherfeaturesof the organization.For instance,
a pre-factory
has exhibitedthe highestrate of productivity
agriculture,
industry,
of virtuallyany industryin the United States. Thus, the formor
improvement
structure
of an organizationmayat timesremainunchanged,whileimprovements
in the functioning
of the formcontinue.
enviFormsmaybe retainedbecausethe rangeof variationhad been restricted,
ronmental
selectioncriteriacannotoperate,or theformis stillthemostfit.Propositionsfroma resourcedependenceperspective
maybe developedaboutthetypesof
in thepopulation.One
willpursueto ensuretheirretention
strategies
organizations
monitortheenvironment
and changetheactivitiesand
strategy
maybe to carefully
structure
to fitenvironmental
demands.This strategy
maybe theonlyfeasibleaction
forsmallerorganizationsin competitive
settings.Creatingbarriersto entry,either
or throughtheuse ofgovernmental
poweris probathroughinterfirm
arrangements
and we havepreviously
consideredthedifferent
forms
blythemostcommonstrategy
one mightarguethatthese
ofbarriersto entry.Followingtheecologicalperspective,
themselvesevolveovertimeas
formsof entrybarriers,as well as otherstrategies,
environmental
conditionschange.
CONCLUSIONS
The environment
of organizationsis importantbecause of its effects
on organizationalstructures
derivesfrom
and decisions.Progressin thestudyof organizations
focusingon substantiveproblemsratherthan fromthe elaborationof conceptual
schemes.Models of environmental
selectionare usefulonly as theyenrichour
of stabilityand changein organizationalforms,or, as Hannan &
understanding
Freeman(1974:10) ask, "Why are thereso many kinds of organizations?"The
naturalselectionmodelanswersthisquestionbyexaminingthenatureand distributionofresourcesin theenvironment,
whiletheresourcedependencemodelfocuses
on the decisionsand powerand influencerelationships
thataffectorganizational
actionsand strategiesthatseek to managethe environment.
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102
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ENVIRONMENTS OF ORGANIZATIONS
103
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104
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ENVIRONMENTS OF ORGANIZATIONS
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